Development Finance: 3 Things it Seeks to Accomplish
As the population grows and the economy changes, the low-income bracket has expanded while the middle remains stagnant. To combat the gaps, the public sector seeks to partner with the private sector through development finance projects. Loans and real estate intermediaries must agree to actively participate in these initiatives. They have to be willing to provide credit of their own. Here are three things that this type of financing seeks to accomplish.
Public sector officials believe that the low-income members of society can be supported into an improved standard of living. Japan is a country that has tried this model and has seen some success. The United States founded The Overseas Private Investment Corporation (OPIC) in 1971. It was a spinoff of USAID. OPIC offers three products including direct loans and guarantees. Political risk insurance and private equity funds are two others.
Development finance asks the real estate sector to lend even though high risk exists. The real estate industry has already taken hits and bailed out by governments including Australia.
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When the real estate, public and private sectors partner, the aim is to expand developments. The partnership is also supposed to provide redevelopment opportunities. Redevelopment projects provide jobs. They also improve existing structures and urban areas. It also helps the environment by reducing urban sprawl and commute times.
Development Finance Conclusion
The goals of development finance are well-intentioned. In the meantime, the partnerships are providing jobs and a boost to the economy.